STATE OF INDIANA Hendricks Regional...Accountants, for the period January 1, 2015 to December 31, 2015. In our opinion, the audit report was In our opinion, the audit report was prepared

STATE OF INDIANA

AN EQUAL OPPORTUNITY EMPLOYER STATE BOARD OF ACCOUNTS

302 WEST WASHINGTON STREET

ROOM E418

INDIANAPOLIS, INDIANA 46204-2765

Telephone: (317) 232-2513

Fax: (317) 232-4711

Web Site: www.in.gov/sboa

July 15, 2016 Board of Trustees Hendricks Regional Health P.O. Box 409 Danville, IN 46122-0409

We have reviewed the audit report prepared by Blue & Company, LLC, Independent Public Accountants, for the period January 1, 2015 to December 31, 2015. In our opinion, the audit report was prepared in accordance with the guidelines established by the State Board of Accounts. Per Report of Independent Auditors opinion, the financial statements included in the report present fairly the financial condition of the Hendricks Regional Health, as of December 31, 2015 and the results of its operations for the period then ended, on the basis of accounting described in the report.

The audit report is filed with this letter in our office as a matter of public record.

Paul D. Joyce, CPA State Examiner

cconrad

Text Box

B46644

CONSOLIDATED FINANCIAL STATEMENTS

AND

SUPPLEMENTARY INFORMATION

DECEMBER 31, 2015 AND 2014

HENDRICKS REGIONAL HEALTH

TABLE OF CONTENTS DECEMBER 31, 2015 AND 2014

Page Report of Independent Auditors .................................................................................................................................... 1 Required Supplementary Information Management’s Discussion and Analysis (Unaudited) ............................................................................. MDA - i Consolidated Financial Statements Consolidated Balance Sheets ........................................................................................................................................ 4 Consolidated Statements of Revenues and Expenses ........................................................................................ 6 Consolidated Statements of Changes in Net Position ........................................................................................ 7 Consolidated Statements of Cash Flows .................................................................................................................. 8 Notes to Consolidated Financial Statements ...................................................................................................... 10 Supplementary Information Consolidating Balance Sheet - December 31, 2015 .......................................................................................... 41 Consolidating Statement of Revenues and Expenses Year Ended December 31, 2015 ............................................................................................................................ 43 Consolidating Balance Sheet - December 31, 2014 .......................................................................................... 44 Consolidating Statement of Revenues and Expenses Year Ended December 31, 2014 ............................................................................................................................ 46 Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios .............................................................. 47 Schedule of Contributions .......................................................................................................................................... 48

1

REPORT OF INDEPENDENT AUDITORS Board of Trustees Hendricks Regional Health Danville, Indiana Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Hendricks Regional Health (Hendricks) which comprise the consolidated balance sheets as of December 31, 2015 and 2014 and the related consolidated statements of revenues and expenses, changes in net position and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the Guidelines for Audits of County and City Hospitals by Independent Certified Public Accountants, issued by the Indiana State Board of Accounts. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Hendricks’ preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Hendricks’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Board of Trustees Hendricks Regional Health Danville, Indiana

2

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hendricks as of December 31, 2015 and 2014, and the results of its operations, changes in its net position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principles As discussed in Note 2 to the consolidated financial statements, in 2015, Hendricks adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Report on Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and the schedules of pension plan information be presented to supplement the basic consolidated financial statements. Such information, although not a part of the basic consolidated financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic consolidated financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic consolidated financial statements, and other knowledge we obtained during our audits of the basic consolidated financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Board of Trustees Hendricks Regional Health Danville, Indiana

3

Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary information listed in the accompanying table of contents is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations, changes in net position and cash flows of the individual entities, and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Indianapolis, Indiana May 31, 2016

REQUIRED SUPPLEMENTARY INFORMATION


MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) DECEMBER 31, 2015 AND 2014

MDA - i

This section of Hendricks Regional Health’s (Hendricks) annual consolidated financial statements presents background information and management’s discussion and analysis (MD&A) of Hendricks’ consolidated financial performance during the year ended December 31, 2015. This MD&A does include a discussion and analysis of the activities and results of the Blended Component Units, Hendricks Regional Health Foundation, Inc. and Hendricks Ambulatory Management Company, LLC. Please read it in conjunction with Hendricks’ consolidated financial statements that follow this MD&A. Financial Highlights Hendricks’ net position increased approximately $36,556,000 or 11% in 2015. Hendricks reported operating income of approximately $40,825,000 for 2015, representing an

increase of approximately $8,826,000 in comparison to the 2014 results. Hendricks continued its expansion of facilities and equipment in 2015 by adding approximately

$25,704,000 in gross property and equipment. Hendricks disposed of capital assets with a net book value of approximately $257,000 during 2015. These items combined with depreciation expense of approximately $15,758,000 resulted in net capital assets increasing approximately $9,689,000 from the prior year.

Hendricks’ assets whose use is limited increased approximately $16,868,000 as a result of

operating income and investment returns.

During 2015 and 2014, Hendricks recognized approximately $253,059,000 and $198,906,000, respectively, of gross patient service revenue related to long-term care.

Using This Annual Report Hendricks’ consolidated financial statements consist of four statements – a Balance Sheet; a Statement of Revenues and Expenses, a Statement of Changes in Net Position; and a Statement of Cash Flows. These consolidated financial statements and related notes provide information about the financial activities and the financial position of Hendricks. The Consolidated Balance Sheet includes all of Hendricks’ assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to creditors (liabilities). All of the current year’s revenue earned and expenses incurred are accounted for in the Consolidated Statement of Revenues and Expenses. The Consolidated Statement of Changes in Net Position summarizes the changes in net position for the year.



MDA - ii

Finally, the purpose of the Consolidated Statement of Cash Flows is to provide information about Hendricks’ cash flows from operating activities, financing activities including capital additions, and investing activities. This statement provides information on the sources and uses of cash and the change in cash balance during the year. The Consolidated Balance Sheet and Statement of Revenues and Expenses One of the most important questions asked about Hendricks’ finances is, “Is Hendricks as a whole better or worse off as a result of the year's activities?” The balance sheet and the statement of revenues and expenses report information about Hendricks’ resources and its activities in a way that helps answer this question. These statements include all restricted and unrestricted assets and all liabilities using the accrual basis of accounting. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report Hendricks’ net position and changes in it. Think of Hendricks’ net position, the difference between assets and liabilities, as one way to measure Hendricks’ financial health, or financial position. Over time, increases or decreases in Hendricks’ net position are one indicator of whether its financial health is improving or deteriorating. Consider other nonfinancial factors, however, such as changes in Hendricks’ patient base and measures of the quality of service it provides to the community, as well as local economic factors to assess the overall health of Hendricks. Table 1: Consolidated Balance Sheets The significant change in Hendricks’ assets and deferred outflows was in assets whose use is limited which increased approximately $16,868,000 in 2015 compared to 2014. The total asset and deferred outflows increase of approximately $56,973,000 in 2015 was 11.6% from 2014. Capital assets, prior to depreciation, increased approximately $16,869,000 while accumulated depreciation increased approximately $7,180,000 for a net increase in capital assets of approximately $9,689,000 in 2015. Current liabilities increased by approximately $24,069,000 mainly related to an increase in accrued expenses and other current liabilities of approximately $20,583,000 and accounts payable of approximately $4,181,000 for 2015. Net position increased by approximately $36,556,000 in 2015 compared to 2014. The increase relates to operating income and investment return.



MDA - iii

The following is a summary of the balance sheets for Hendricks.

Restated Change Restated2015 2014 2015 - 2014 2013

AssetsCurrent assets 140,080,125$ 107,964,350$ 32,115,775$ 108,749,396$ Capital assets, net 215,784,814 206,095,940 9,688,874 203,769,763 Assets whose use is limited 176,298,339 159,430,416 16,867,923 131,506,649 Other assets 8,121,502 15,493,227 (7,371,725) 14,796,274

Total assets 540,284,780 488,983,933 51,300,847 458,822,082

Deferred outflows 7,467,158 1,795,457 5,671,701 1,913,192

Total assets and deferred outflows 547,751,938$ 490,779,390$ 56,972,548$ 460,735,274$

LiabilitiesCurrent liabilities 86,587,811$ 62,519,168$ 24,068,643$ 61,463,132$ Long-term debt 102,923,349 106,562,019 (3,638,670) 111,478,565

Total liabilities 189,511,160 169,081,187 20,429,973 172,941,697

Deferred inflows 41,042 54,722 (13,680) 68,402

Total liabilities and deferred inflows 189,552,202 169,135,909 20,416,293 173,010,099

Net positionNet investment in capital assets 115,099,431 96,649,378 18,450,053 89,709,390 Restricted 23,834,571 24,825,100 (990,529) 25,340,676 Unrestricted 219,265,734 200,169,003 19,096,731 172,675,109

Total net position 358,199,736 321,643,481 36,556,255 287,725,175 Total liabilities, deferred inflows

and net position 547,751,938$ 490,779,390$ 56,972,548$ 460,735,274$

Total assets and deferred outflows in 2014 compared to 2013 increased approximately $30,044,000. The majority of the change was in assets whose use is limited whose increase was approximately $27,924,000 in 2014 from 2013. Net capital assets and other assets increased approximately a combined $3,023,000 in 2014. Total liabilities in 2014 decreased approximately $3,861,000 mainly related to principal payments on long-term debt. The net position in 2014 increased approximately $33,918,000 over 2013 based on operating income and investment return.



MDA - iv

Table 2: Consolidated Statements of Revenues and Expenses Hendricks’ performance in 2015 was favorable with a return on equity of 10.2% compared to prior year’s 10.5%. Total operating revenue increased approximately $31,277,000 as net patient service revenue increased approximately $31,067,000 in 2015 over 2014. Long-term care services constituted the majority of the increase in 2015. Expenses increased by approximately $22,451,000 between 2014 and 2015. Salaries, wages and benefits increased approximately $13,065,000 while medical supplies and drugs increased approximately $3,887,000 in 2015. Long-term care services contributed to the majority of the 2015 increase related to facility and equipment leases of approximately $2,554,000 and other supplies and expenses of approximately $4,067,000. Nonoperating income (expense) decreased by approximately $6,037,000 due to investment income of approximately $1,593,000 in 2015 compared to approximately $7,854,000 in 2014 combined with interest expense decreasing approximately $225,000 from 2014.

Restated Change2015 2014 2015 - 2014 2013

Operating revenueNet patient service revenue 488,304,748$ 457,237,544$ 31,067,204$ 407,880,347$ Other operating revenue 6,571,883 6,361,995 209,888 8,792,712

Total operating revenue 494,876,631 463,599,539 31,277,092 416,673,059

Operating expensesSalaries and benefits 122,150,217 109,085,398 13,064,819 109,238,561 Medical supplies and drugs 39,656,598 35,769,642 3,886,956 30,572,425 Depreciation and amortization 15,907,206 14,623,198 1,284,008 13,516,113 Other operating expenses 276,338,069 272,122,756 4,215,313 224,944,456

Total operating expenses 454,052,090 431,600,994 22,451,096 378,271,555

Operating income 40,824,541 31,998,545 8,825,996 38,401,504

Nonoperating income (expense)Investment income 1,592,974 7,854,345 (6,261,371) 5,559,776 Interest expense (5,125,952) (5,350,629) 224,677 (5,572,129)

Total nonoperating income (expense), net (3,532,978) 2,503,716 (6,036,694) (12,353)

Change in net position before other items 37,291,563 34,502,261 2,789,302 38,389,151

Other itemsContributions from non-controlling interest 99,892 -0- 99,892 29,696 Dividends to non-controlling interest (835,200) (583,955) (251,245) (79,890)

Change in net position 36,556,255$ 33,918,306$ 2,637,949$ 38,338,957$

Note - The 2013 statement of revenues and expenses was not restated as it was not practical to determine the effectsof GASB 68 as no valuation was performed as of January 1, 2013.



MDA - v

Total operating revenue increased approximately $46,926,000 as net patient service revenue increased approximately $49,357,000 in 2014 over 2013. Long-term care services constituted the majority of the increase in 2014. Expenses increased by approximately $53,329,000 between 2013 and 2014. Long-term care services contributed to the majority of the 2014 increase related to purchased services, facility and equipment leases and other supplies and expenses which increased in total by approximately $35,623,000 in 2014. Nonoperating income (expense) increased by approximately $2,516,000 due to investment income of approximately $7,854,000 in 2014 compared to $5,560,000 in 2013 and interest expense decreasing approximately $222,000 from 2013. Consolidated Statements of Changes in Net Position Hendricks’ net position increased approximately $36,556,000 in 2015, $33,918,000 in 2014 and $38,339,000 in 2013 including contributions and distributions for non-controlling interest. The following is a net position progression:

Restated2015 2014 2013

Net position, beginning of year 321,643,481$ 287,725,175$ 249,386,218$ Change in net position 36,556,255 33,918,306 38,338,957 Net position, end of year 358,199,736$ 321,643,481$ 287,725,175$

Note - The 2013 statement of changes in net position was not restated as it was not practical todetermine the effects of GASB 68 as no valuation was performed as of January 1, 2013.

Consolidated Statements of Cash Flows The final required statement is the statement of cash flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing, and financing activities. It provides answers to such questions as “Where did cash come from?” “What was cash used for?” and “What was the change in cash balance during the reporting period?” Total cash and cash equivalents increased approximately $13,577,000 in 2015. This was an increase of approximately $10,249,000 from 2014. Operating activities generated cash and cash equivalents of approximately $63,260,000 during 2015, an increase of approximately $12,884,000 from 2014. Capital and related financing decreased cash and cash equivalents by approximately $32,365,000 during 2015 compared to a decrease of approximately $26,530,000 in 2014, mainly as the result of expenditures for property and equipment additions. Investing activities decreased cash and cash equivalents by approximately $17,318,000 in 2015 compared to approximately $20,518,000 in 2014, due to investment activity and the purchase of investments with available cash equivalents.



MDA - vi

Restated Change2015 2014 2015 - 2014 2013

Cash flow from activitiesOperating 63,260,208$ 50,376,590$ 12,883,618$ 59,580,817$ Capital and related financing (32,364,504) (26,529,919) (5,834,585) (23,229,128) Investing (17,318,310) (20,518,414) 3,200,104 (12,240,126)

Change in cash and cash equivalents 13,577,394$ 3,328,257$ 10,249,137$ 24,111,563$

Note - The 2013 statement of cash flows was not restated as it was not practical to determine the effects

of GASB 68 as no valuation was performed as of January 1, 2013. Cash flows from operating activities in 2014 were approximately $9,204,000 lower than 2013. Cash flows used in capital and related financing activities in 2014 were approximately $3,301,000 more than 2013. Finally, cash flows used in investing activities in 2014 were approximately $8,278,000 more than 2013. Cash and cash equivalents in total increased approximately $3,328,000 in 2014 and also increased in total by approximately $24,112,000 in 2013. Sources of Revenue During 2015, Hendricks derived substantially all of its revenue from patient service and other related activities. A significant portion of the patient service revenue is from patients that are insured by government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. Revenues from the Medicare and Medicaid programs represented 50% of gross revenues of the hospital operations in 2015 but only 32% of Hendricks’ net patient service revenues. Following is a table of major sources of gross patient revenues for 2015:

% of GrossPayor RevenuesMedicare 43%Anthem/Blue Cross 25%Commercial and other 21%Medicaid 7%Self-Pay 4%Total 100%

Outpatient services represented approximately 75% of acute care gross patient revenue for both 2015 and 2014. According to the Indiana Hospital Association’s IHA Databank, the State of Indiana’s average outpatient percent of total charges was approximately 56% and 53% for 2015 and 2014, respectively.



MDA - vii

Capital Assets During 2015, Hendricks invested approximately $16,869,000 in capital assets net of asset disposals compared to $7,449,000 in 2014. Capital assets net of asset disposals added during 2013 were $12,979,000. The change in capital assets is outlined in the following table:

Change2015 2014 2015 - 2014 2013

Land and improvements 22,771,415$ 22,593,377$ 178,038$ 22,318,268$ Buildings and fixed equipment 262,186,045 253,106,765 9,079,280 245,289,973 Major moveable equipment 86,565,487 76,974,775 9,590,712 79,924,436 Construction in progress 658,195 2,637,667 (1,979,472) 331,097

Total capital assets 372,181,142 355,312,584 16,868,558 347,863,774

Less accumulated depreciation 156,396,328 149,216,644 7,179,684 144,094,011 Capital assets - net 215,784,814$ 206,095,940$ 9,688,874$ 203,769,763$

Hendricks continues to invest in its facilities to meet the needs of the community, and strives to replace, as well as upgrade, equipment as needed. Debt Total long-term debt decreased from approximately $111,242,000 to $108,153,000 in 2015 due mainly to normal principal payments. During 2015, Hendricks did issue long-term debt to construct a new ambulatory care facility. More detailed information about Hendricks’ long-term debt is presented in the Notes to the Consolidated Financial Statements. Economic Outlook Management believes that the health care industry’s and Hendricks’ operating margins will continue to be under pressure due to a variety of factors including, but not limited to, health care reform, changes in payor and services mix, and growth in operating expenses that are in excess of the increases in contractually arranged and legally established payments received for services rendered. In addition, the adoption of high-deductible health plans by employers continues to occur and patients are increasingly being held responsible for more of the cost of health care. Consequently, the health care market place has been increasingly more competitive. The ongoing challenge facing Hendricks is to continue to provide quality patient care in this competitive environment, and to attain reasonable rates for the services that are provided while managing costs. The most significant factor affecting Hendricks is finding the balance in maintaining and controlling labor costs in the face of pressures on volume and pricing for its services in this increasingly competitive, retail-like environment.



MDA - viii

Contacting Hendricks’ Financial Management This financial report is designed to provide our patients, suppliers, taxpayers, and creditors with a general overview of Hendricks’ finances and to show Hendricks’ accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Administrative Offices (ATTN: Vice President of Finance/CFO), at PO Box 409, Danville, IN, 46122-0409.


CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014

See accompanying notes to consolidated financial statements. 4

Restated2015 2014

Current assetsCash and cash equivalents 6,304,607$ 8,474,250$ Investments 52,990,776 36,133,462 Patient accounts receivable, less allowance

for uncollectible accounts of $24,024,000in 2015 and $28,584,000 in 2014 42,884,899 38,709,288

Inventories 2,475,575 2,544,405 Other current assets 30,195,076 17,422,945 Current portion of assets whose use is limited 5,229,192 4,680,000

Total current assets 140,080,125 107,964,350

Assets whose use is limitedBoard designated funded depreciation investments 172,042,613 154,530,628 Held by trustee for debt service 8,979,257 9,099,334 Other board designated investments 505,661 480,454

Total assets whose use is limited 181,527,531 164,110,416

Less current portion 5,229,192 4,680,000 Noncurrent assets whose use is limited 176,298,339 159,430,416

Capital assetsLand 16,574,202 16,407,702 Depreciable capital assets 354,948,745 336,267,215 Construction in progress 658,195 2,637,667

372,181,142 355,312,584 Less accumulated depreciation 156,396,328 149,216,644

Capital assets, net 215,784,814 206,095,940

Other assetsPension asset 7,845,708 14,619,278 Other 275,794 873,949

Total other assets 8,121,502 15,493,227

Total assets 540,284,780 488,983,933

Deferred outflows 7,467,158 1,795,457 Total assets and deferred outflows 547,751,938$ 490,779,390$

ASSETS AND DEFERRED OUTFLOWS


CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014


Restated2015 2014

Current liabilitiesCurrent portion of long-term debt 5,229,192$ 4,680,000$ Accounts payable 17,618,658 13,437,184 Accrued salaries and related liabilities 9,008,212 8,512,542 Accrued expenses and other current liabilities 52,028,900 31,446,365 Accrued interest 1,752,912 1,836,829 Estimated third-party settlements 949,937 2,606,248

Total current liabilities 86,587,811 62,519,168

Long-term debt, net of current portion 102,923,349 106,562,019 Total liabilities 189,511,160 169,081,187

Deferred inflows 41,042 54,722 Total liabilities and deferred inflows 189,552,202 169,135,909

Net positionNet investment in capital assets 115,099,431 96,649,378 Restricted

Debt service 8,979,257 9,099,334 Restricted for pension - expendable 13,594,102 14,564,556 Non-expendable 1,261,212 1,161,210

Total restricted 23,834,571 24,825,100 Unrestricted 219,265,734 200,169,003

Total net position 358,199,736 321,643,481

Total liabilities, deferred inflows and net position 547,751,938$ 490,779,390$

LIABILITIES, DEFERRED INFLOWS AND NET POSITION


CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES YEARS ENDED DECEMBER 31, 2015 AND 2014


Restated2015 2014

Operating revenueNet patient service revenue 488,304,748$ 457,237,544$ Other operating revenue 6,571,883 6,361,995

Total operating revenue 494,876,631 463,599,539

Operating expensesSalaries and wages 93,606,250 87,191,669 Employee benefits 28,543,967 21,893,729 Professional medical fees 1,713,680 2,342,882

Other professional fees 24,968,237 18,657,518 Medical and surgical supplies 28,230,717 26,575,459 Drugs and intravenous solutions 11,425,881 9,194,183 Food 6,414,693 6,557,509

Purchased services 149,068,752 148,915,943 Equipment rental 3,192,471 3,442,762 HAF Program 3,106,589 12,058,688 Telephone and utilities 8,943,035 9,450,183 Depreciation and amortization 15,907,206 14,623,198

Insurance 6,437,465 4,825,095 Facility and equipment leases 29,960,580 27,406,480 Other supplies and expenses 42,532,567 38,465,696

Total operating expenses 454,052,090 431,600,994

Operating income 40,824,541 31,998,545

Nonoperating income (expense)Investment income 1,592,974 7,854,345 Interest expense (5,125,952) (5,350,629)

Total nonoperating income (expense), net (3,532,978) 2,503,716

Change in net position before other items 37,291,563 34,502,261

Other itemsContributions from non-controlling interest 99,892 -0- Dividends to non-controlling interest (835,200) (583,955)

Change in net position 36,556,255$ 33,918,306$


CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION YEARS ENDED DECEMBER 31, 2015 AND 2014


Controlling Non-controllingInterest Interest Total

Net position balancesDecember 31, 2013, restated 286,567,617$ 1,157,558$ 287,725,175$

Change in net position 33,914,654 3,652 33,918,306

December 31, 2014, restated 320,482,271 1,161,210 321,643,481

Change in net position 36,456,253 100,002 36,556,255

December 31, 2015 356,938,524$ 1,261,212$ 358,199,736$


CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2015 AND 2014


Restated2015 2014

Operating activitiesCash received from patient services 482,472,826$ 467,250,304$ Cash paid for salaries, wages and benefits (120,566,358) (113,087,074) Cash paid to vendors and suppliers (305,218,143) (310,148,635) Other receipts, net 6,571,883 6,361,995

Net cash flows from operating activities 63,260,208 50,376,590

Capital and related financing activitiesAcquisition and construction of capital assets (23,822,011) (16,042,527) Contributions from non-controlling interest 99,892 -0- Dividends to non-controlling interest (835,200) (583,955) Loss of disposal of property and equipment 257,115 22,088 Interest on long-term debt (5,209,869) (5,430,525) Proceeds from issuance of long-term debt 2,083,369 -0- Principal payments for long-term debt (4,937,800) (4,495,000)

Net cash flows from capital and related financing activities (32,364,504) (26,529,919)

Investing activitiesInvestment income 1,592,974 7,854,345 Purchase of investments (40,462,399) (52,727,871) Proceeds from sale of investments 21,551,115 24,355,112

Net cash flows from investing activities (17,318,310) (20,518,414)

Net change in cash and cash equivalents 13,577,394 3,328,257

Cash and cash equivalentsBeginning of year 55,107,690 51,779,433 End of year 68,685,084$ 55,107,690$

Reconciliation of cash and cash equivalents to the balance sheets

Cash and cash equivalentsIn current assets - cash and cash equivalents 6,304,607$ 8,474,250$ In investments 52,112,994 35,297,887 In board designated funds 10,267,483 11,335,553

Total cash and cash equivalents 68,685,084$ 55,107,690$


CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2015 AND 2014


Restated2015 2014

Reconciliation of operating income to net cash flows from operating activities

Operating income 40,824,541$ 31,998,545$ Adjustment to reconcile operating income to

net cash flows from operating activitiesDepreciation and amortization 15,907,206 14,623,198 Provsion for bad debts 16,929,696 22,397,804 Changes in operating assets and liabilities

Patient accounts receivable (21,105,307) (13,440,812) Inventories 68,830 (467,809) Other current assets (12,772,131) (4,085,490) Pension asset 6,773,570 531,130 Other assets 598,155 (202,578) Deferred outflows (5,671,701) 117,735 Accounts payable 2,299,135 (2,160,090) Accrued salaries and related liabilities 495,670 (4,519,126) Accrued expenses and other current liabilities 20,582,535 4,541,995 Estimated third-party settlements (1,656,311) 1,055,768 Deferred inflows (13,680) (13,680)

Net cash flows from operating activities 63,260,208$ 50,376,590$

Supplemental disclosure of cash flows informationCash paid for interest 5,293,786$ 5,510,421$

Noncash capital and related financing activitiesProperty purchases in accounts payable 1,882,339$ 889,145$


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2015 AND 2014

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1. SIGNIFICANT ACCOUNTING POLICIES Organization and Reporting Entity Hendricks County Hospital, doing business as Hendricks Regional Health (Hendricks), is a county owned facility operating under the Indiana County Hospital Law, Indiana Code 16-22. Hendricks provides inpatient, outpatient, emergency and ambulatory care as well as long-term care. The Board of County Commissioners of Hendricks County appoints the Governing Board of Hendricks and a financial benefit/burden relationship exists between Hendricks County (County) and Hendricks. For these reasons, Hendricks is considered a component unit of the County. The consolidated financial statements of Hendricks are intended to present the financial position and the changes in financial position and cash flows of only that portion of the business-type activities of the County that is attributable to the transactions of Hendricks and its component units. They do not purport to, and do not, present fairly the financial position of the County as of December 31, 2015 and 2014, the changes in its net position or its cash flows for the years then ended. Accounting principles generally accepted in the United States of America require the consolidated financial statements present Hendricks and its blended component units, collectively referred to as “primary government”. The component units discussed in these consolidated financial statements are included in Hendricks’ reporting entity because of the significance of their operational or financial relationship with Hendricks. A blended component unit, although a legally separate entity, is in substance part of the primary government unit of operations and exists solely to provide services to Hendricks. Long-Term Care Operations Hendricks owns the operations of over twenty-five long-term care facilities by way of an arrangement with the Managers of the facilities. These facilities provide inpatient and therapy services. Generally, gross revenues from the operation of the facilities are the property of Hendricks, who is responsible for the associated operating expenses and working capital requirements. While the management and related lease agreements are in effect, the performance of all activities of the Managers shall be on behalf of Hendricks, who retains the authority and legal responsibility for the operation of the facilities. Hendricks has lease agreements for the long-term care facilities, collectively referred to as the Lessors, to lease the facilities managed by the Managers. Concurrently, Hendricks entered into agreements with the Managers to manage the leased facilities. As part of the agreements, Hendricks pays the Managers a management fee to continue managing the facilities on behalf of Hendricks in accordance with the terms of the agreements. These management fees consist of base management fees, subordinated management fees, and quarterly incentive payments. The agreements expire at various times through 2019. The terms of these agreements may be renewed at the end of each term for an additional period of two years. All parties involved can terminate the agreement without cause with 90 days written notice.



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Basis of Consolidation The accompanying consolidated financial statements of Hendricks include the accounts of the Blended Component Unit - Hendricks Regional Health Foundation, Inc. (Foundation), a separate not-for-profit entity organized to support the operations of Hendricks. It also includes the accounts of the Blended Component Unit - Hendricks Ambulatory Management Company, LLC (HAMCO), a separate limited liability company entity. HAMCO was formed to manage Hendricks’ outpatient surgery center. As the sole Class B member of HAMCO, Hendricks maintains controlling interest in voting rights. Hendricks also maintains substantial participation in the operations of HAMCO in addition to an economic interest in HAMCO’s financial position. All significant transactions between the entities have been eliminated for financial reporting purposes. Enterprise Fund Accounting Hendricks utilizes the enterprise fund method of accounting whereby revenue and expenses are recognized on the accrual basis of accounting. Substantially all revenues and expenses are subject to accrual. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United State of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Standards Management has not currently determined what effects, if any, the implementation of the following recently enacted statements may have on its future consolidated financial statements: Government Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, issued February 2015, will be effective for periods beginning after June 15, 2015. This Statement will enhance the comparability of financial statements among governmental entities by requiring the measurement of certain assets and liabilities at fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. This Statement also will enhance fair value application guidance and related disclosures in order to provide information to financial statement users about the impact of fair value measurements on a governmental entities financial position.



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GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, issued June 2015, will be effective for financial statements for periods beginning after June 15, 2015. The objective of this Statement is to identify – in the context of the current governmental financial reporting environment – the hierarchy of generally accepted accounting principles (GAAP). The “GAAP hierarchy” consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. Cash and Cash Equivalents Cash and cash equivalents include all cash held in checking, savings and money market deposit accounts available for operating purposes with original maturity dates of 90 days or less. Hendricks maintains its cash in accounts, which at times may exceed federally insured limits. Hendricks has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on cash and cash equivalents. Included in cash and cash equivalents are amounts held by Hendricks under agreement with the State of Indiana relating to non-state government operated nursing facilities. These funds are required to be held through the end of Hendricks’ fiscal year, at which time they are available for the general corporate purposes of Hendricks. Subsequent to December 31, 2015, approximately $50,177,000 of funds became available and was invested with assets whose use is limited – board designated funds. Investments Investments consist of cash, cash equivalents, certificates of deposit which are reported at contract value which approximates fair value. Mutual funds are reported at fair value. Patient Accounts Receivable and Net Patient Service Revenue Patient revenues and the related accounts receivable are recorded at the time services to patients are performed. Hendricks is a provider of services to patients entitled to coverage under Titles XVIII and XIX of the Health Insurance Act (Medicare and Medicaid). Differences between the total program billed charges and the payments received are reflected as deductions from revenue. At year-end, a cost report for hospital-based services is filed with the Medicare program computing reimbursement amounts related to Medicare patients. The difference between computed reimbursement and interim reimbursement is reflected as a receivable from or payable to the third-party programs. These programs have audited the year-end cost report filed with the Medicare program through December 31, 2013 with differences reflected as deductions from revenue in the year the cost report is settled. Amounts for unresolved cost reports for 2014 and 2015 are reflected in estimated third-party settlements on the consolidated balance sheets. During 2015 and 2014, Hendricks recognized an increase in net position of approximately $500,000 and $200,000, respectively, in the consolidated statements of revenues and expenses due to the differences between original estimates and



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subsequent revisions for the final settlement of cost reports. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. Although these audits may result in some changes in these amounts, they are not expected to have a material effect on the accompanying consolidated financial statements. Hendricks has entered into agreements with certain commercial carriers. Reimbursement for services under these agreements includes discounts from established charges and other payment methodologies. Patient charges under these programs, on which no interim payments have been received, are included in patient accounts receivable at the estimated net realizable value of such charges. Management estimates an allowance for uncollectible patient accounts receivable based on an evaluation of historical losses, current economic conditions, and other factors unique to Hendricks’ customer base. Electronic Health Records (EHR) Incentive Payments Hendricks receives EHR incentive payments under the Medicare and Medicaid programs. To qualify for the EHR incentive payments, Hendricks must meet “meaningful use” criteria that become more stringent over time. Hendricks periodically submits and attests to its use of certified EHR technology, satisfaction of meaningful use objectives, and various patient data. These submissions generally include performance measures for each annual EHR reporting period (Federal fiscal year ending September 30). The related EHR incentive payments are paid out over a four year transition schedule and are based upon data that is captured in Hendricks’ cost reports for hospital-based services. The payment calculation is based upon an initial amount as adjusted for discharges, Medicare and Medicaid utilization using inpatient days multiplied by a factor of total charges excluding charity care to total charges, and a transitional factor that ranges from 100% in first payment year and thereby decreasing by 25% each payment year until it is completely phased out in the fifth year. Hendricks recognizes EHR incentive payments as grant income when there is reasonable assurance that Hendricks will comply with the conditions of the meaningful use objectives and any other specific agreement requirements. In addition, the financial statement effects of the income must be both recognizable and measurable. During 2015 and 2014, Hendricks recognized approximately $813,000 and $1,240,000, respectively, in EHR incentive payments as income. Under the ratable recognition method, Hendricks recognizes income ratably over the entire EHR reporting period when it is reasonably assured at the outset of the EHR reporting period that it will comply with the minimum requirements of the program.



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EHR incentive income is included in other operating revenue in the consolidated statements of revenues and expenses. EHR incentive income recognized is based on management’s estimate and amounts are subject to change, with such changes impacting operations in the period the changes occur. Receipt of these funds is subject to the fulfillment of certain obligations by Hendricks as prescribed by the program, subject to future audits and may be subject to repayment upon a determination of noncompliance. Inventories Pharmaceutical inventories are valued at the lower of cost or market with cost being determined on the first-in, first-out (FIFO) method while medical and all other supplies are priced using the last-in, first-out (LIFO) method. Inventories at year-end consist of the following:

2015 2014Medical supplies and other 1,982,249$ 2,051,079$ Pharmaceutical 493,326 493,326

2,475,575$ 2,544,405$

Other Current Assets Other current assets consist of prepaid expenses, other reimbursement receivables related to long-term care services and various other current items. These assets are classified as current as they are expected to be utilized within the next fiscal year. Assets Whose Use is Limited Assets whose use is limited are stated at fair value in the consolidated financial statements. These assets include investments designated by Hendricks’ Board for internal purposes and investments held by trustees for debt service and capital improvements. These investments consist primarily of cash and cash equivalents, certificates of deposit, mutual funds and fixed income obligations. Investment income, to the extent not capitalized, is reported as nonoperating income in the consolidated statements of revenues and expenses. Capital Assets and Depreciation Capital assets such as property and equipment are stated at cost and include expenditures for new additions and other costs added to existing facilities which exceed Hendricks’ capitalization threshold and which substantially increase the useful lives of existing facilities. Maintenance, repairs and minor renewals are expensed as incurred.



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Hendricks provides for depreciation of property and equipment using annual rates, which are sufficient to depreciate the cost of depreciable assets over their estimated useful lives using the straight-line method. The range of useful lives in computing depreciation is as follows:

Range of Description Useful LivesLand improvements 15 yearsBuildings and fixed equipment 4-50 yearsMajor movable equipment 5-15 years

Advertising and Community Relations Hendricks records advertising and community relations expense in the period incurred. Total expense for advertising and community relations was approximately $1,523,000 and $1,976,000 for 2015 and 2014, respectively. Net Position Net position of Hendricks is classified in four components. (1) Net investment in capital assets consist of capital assets net of accumulated depreciation plus deferred outflows related to losses on bond refundings which are reduced by the balance of any outstanding borrowings used to finance the purchase or construction of those assets. (2) Restricted expendable net position includes assets that must be used for a particular purpose, as specified by creditors, grantors, or contributors external to Hendricks, including amounts deposited with trustees as required by revenue note indentures and defined benefit pension plans including related deferred outflows for defined benefit pension plans (3) Restricted nonexpendable net position includes the principal portion of permanent endowments and non-controlling interests owned by external investors. (4) Unrestricted net position is remaining net position that does not meet the definition of net investment in capital assets or restricted. Hendricks first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. Consolidated Statements of Revenues and Expenses Hendricks’ consolidated statements of revenues and expenses distinguish between operating and nonoperating revenues and expenses. Operating revenues result from exchange transactions associated with providing health care services which is the principal activity of Hendricks. Contributions and investment income are reported as nonoperating revenues. Operating expenses are all expenses incurred to provide health care services, excluding interest costs.



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Charity Care and Assistance to the Uninsured Hendricks provides care without charge or at amounts less than its established rates to patients who meet certain criteria under its charity care and financial assistance policy, including those patients who are uninsured. Because Hendricks does not collect amounts deemed to be charity care, revenue is adjusted for these amounts. Hendricks maintains records to identify and monitor the level of charity care it provides. These records include the amount of services and supplies furnished under its charity care and financial assistance policy. The charity care charges provided during 2015 and 2014 were approximately $8,034,000 and $7,775,000, respectively. Hendricks did not change its charity care and financial assistance policy during 2015 and 2014. Of Hendricks’ total expenses reported, including interest expense, in 2015 and 2014, an estimated $3,354,000 and $3,340,000 arose from providing services to charity patients during 2015 and 2014, respectively. The estimated costs of providing charity services are based on a calculation which applies a ratio of costs to charges to the gross uncompensated charges associated with providing care to charity patients. The ratio of cost to charges is calculated based on Hendricks’ total expenses including interest expense to gross patient service revenue. Hendricks has a policy with discounted rates similar to contractual payors for uninsured patients. Uninsured self pay discounts provided to patients were approximately $4,504,000 and $4,200,000 for 2015 and 2014, respectively. Costs of Borrowing Interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets. Federal or State Income Taxes Hendricks is a governmental instrumentality organized under Title 16, Article 12, of the Indiana statues and, accordingly, is generally exempt from federal income tax under Section 115 of the Internal Revenue Code (IRC) of 1986. As a governmental entity under Section 115 of the IRC, Hendricks is not required to file Federal Form 990 – Return of Organization Exempt from Income Tax, which is an informational return only. The Foundation is organized as a not-for-profit organization under Section 501(c)(3) of the United States IRC. As such, the Foundation is generally exempt from income taxes. However, the Foundation is required to file Federal Form 990 – Return of Organization Exempt from Income Tax, which is an informational return only. The Foundation has filed its federal and state income tax returns for periods through December 31, 2014. These income tax returns are generally open to examination by the relevant taxing authorities for a period of three years from the later of the date the return was filed or its due date (including approved extensions).



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HAMCO is a Limited Liability Company (LLC) and profit and loss are passed through to the members of the LLC. HAMCO has filed its federal and state income tax returns for periods through December 31, 2014. These income tax returns are generally open to examination by the relevant taxing authorities for a period of three years from the later of the date the return was filed or its due date (including approved extensions). Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by Hendricks, the Foundation, and HAMCO and recognize a tax liability if these organizations have taken an uncertain position that more likely than not would not be sustained upon examination by various federal and state taxing authorities. Management has analyzed the tax positions taken by these organizations, and has concluded that as of December 31, 2015 and 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the accompanying consolidated financial statements. The Foundation and HAMCO are subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Compensated Absences Hendricks’ employees earn time off at varying rates depending on years of service under separate policies for vacation and personal leaves. The estimated amount of unused time off is reported as a liability in the consolidated financial statements. Pensions For purposes of measuring the net pension asset/liability, deferred outflows and deferred inflows of resources related to pensions, pension expense, information about the fiduciary net position of Hendricks defined benefit pension plan (the Plan), and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Reclassifications Certain amounts from the 2014 consolidated financial statements have been reclassified to conform to the current year presentation. The reclassifications have no effect on previously reported net position or change in net position. Litigation Hendricks is exposed to litigation arising in the normal course of business. After consultation with legal counsel, management estimates that these matters will be resolved without material adverse effect on Hendricks’ future financial position, results from operations or cash flows.



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Risk Management Hendricks is exposed to various risks of loss from torts; theft of, damage to, and destruction of assets; business interruption; errors and omissions; employee injuries and illnesses; natural disasters; employee health, dental, and accident benefits. Commercial insurance coverage is purchased for claims arising from such matters. Settled claims have not exceeded this commercial coverage in any of the three preceding years. Medical Malpractice Malpractice insurance coverage is provided under a claims-made policy. Should the claims-made policy be terminated, Hendricks has the option to purchase insurance for claims having occurred during its term but reported subsequently. The Indiana Medical Malpractice Act (the Act) provides for a maximum recovery of $1,250,000 per occurrence ($7,500,000 annual aggregate) for professional liability, $250,000 of which would be paid through Hendricks’ malpractice insurance coverage and the balance would be paid by the State of Indiana Patient Compensation Fund. Hendricks is a member in a captive insurance company, Suburban Health Organization Segregated Portfolio Company, LLC, to fund Hendricks’ required portion of the professional and physician insurance coverage pursuant to the Act as well as its general liability insurance and excess coverage. This provides protection from liability in an amount not to exceed $250,000 per incident and aggregate liability protection not to exceed $7,500,000 per year. In addition, Hendricks maintains a commercial umbrella/excess liability policy with a limit of $1,000,000 each occurrence, $1,000,000 fire legal liability, $1,000,000 personal and advertising injury, and a $3,000,000 total policy aggregate. Subsequent Events Hendricks evaluates events or transactions occurring subsequent to consolidated balance sheet date for recognition and disclosure in the accompanying consolidated financial statements through the date the consolidated financial statements are issued which is May 31, 2016. 2. RESTATEMENT FOR CHANGE IN ACCOUNTNG PRINCIPLE During 2015, Hendricks implemented GASB Statement No. 68 Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27. This Statement establishes the accounting and financial reporting standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures related to certain pensions. The Statement improves the decision usefulness of information in employer and governmental non-employer contributing entity financial reports and enhances its value for assessing accountability and inter-period equity by requiring recognition of the entire net pension asset/liability and a more comprehensive measure of pension expense.



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During 2015, Hendricks implemented GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB Statement No. 68. This Statement amends previous guidance to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. The 2014 consolidated financial statements have been retroactively restated to address the implementation of these new standards and the effects on the consolidated financial statements are detailed below:

PreviouslyReported Adjustment Restated

Consolidated balance sheetPension asset -0-$ 14,619,278$ 14,619,278$ Total assets and deferred outflows 476,160,112$ 14,619,278$ 490,779,390$ Accrued expenses and other current liabilities 32,440,678$ (994,313)$ 31,446,365$ Total current liabilities 63,513,481$ (994,313)$ 62,519,168$ Total liabilities 170,075,500$ (994,313)$ 169,081,187$ Deferred inflows -0-$ 54,722$ 54,722$ Total liabilities and deferred inflows 170,075,500$ (939,591)$ 169,135,909$ Restricted for pension - expendable -0-$ 14,564,556$ 14,564,556$ Total restricted 10,260,544$ 14,564,556$ 24,825,100$ Unrestricted 199,174,690$ 994,313$ 200,169,003$ Total net position 306,084,612$ 15,558,869$ 321,643,481$ Total liabilities, deferred inflows and net position 476,160,112$ 14,619,278$ 490,779,390$

Consolidated statement of revenues,expenses and changes in net position

Employee benefits 22,370,592$ (476,863)$ 21,893,729$ Total expenses 432,077,857$ (476,863)$ 431,600,994$ Operating income 31,521,682$ 476,863$ 31,998,545$ Change in net position before other items 34,025,398$ 476,863$ 34,502,261$ Change in net position 33,441,443$ 476,863$ 33,918,306$ Total net position, December 31, 2013 272,643,169$ 15,082,006$ 287,725,175$

Consolidated statement of cash flowsOperating activities

Operating income 31,521,682$ 476,863$ 31,998,545$ Pension asset -0-$ 531,130$ 531,130$ Accrued salaries and related liabilities (3,524,813)$ (994,313)$ (4,519,126)$ Deferred inflows -0-$ (13,680)$ (13,680)$

December 31, 2014



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3. INVESTMENTS Investments consist of cash and cash equivalents. Mutual funds are reported at fair value. Investments balances as of December 31, 2015 and 2014 were approximately $52,991,000 and $36,133,000, respectively. Certificates of deposit are reported at contract value. 4. ASSETS WHOSE USE IS LIMITED Hendricks funds depreciation expense to meet the capital equipment needs of the facility. Depreciation is funded totally, with expenditures for capital equipment and debt principal payments reducing the funded depreciation balance. Hendricks designates other investments to fund specific projects. All interest earned by the funded depreciation and other board designated investments accounts are left to accumulate as an addition to the funds. Hendricks maintains funds which are held by trustee for debt service, capital improvements, and other purposes. The following represents assets whose use is limited as of December 31, 2015 and 2014:

2015 2014Assets whose use is limited

Cash and cash equivalents 10,267,483$ 11,335,553$ Certificates of deposit 300,000 300,753Investments 170,960,048 152,474,110

181,527,531$ 164,110,416$

5. DEPOSITS AND INVESTMENTS Deposits with financial institutions in the State of Indiana at year end were entirely insured by the Federal Depository Insurance Hospital or by the Indiana Deposit Insurance Fund. This includes any deposit accounts issued or offered by a qualifying financial institution. Investments are carried at fair market value except for certificates of deposits which are carried at contract value. Net realized gains and losses on security transactions are determined on the specific identification cost basis. Funded depreciation investments consist of cash equivalents, mutual funds and fixed income obligations.



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As of December 31, 2015 and 2014, Hendricks had the following investments and maturities, all of which were held in Hendricks’ name by custodial banks that are agents of Hendricks:

Carrying Less MoreAmount than 1 1-5 6-10 than 10

Certificates of deposit 300,000$ 300,000$ -0-$ -0-$ -0-$ Mutual funds 166,710,330 166,710,330 -0- -0- -0- Fixed income obligations 5,127,500 -0- -0- -0- 5,127,500

172,137,830$ 167,010,330$ -0-$ -0-$ 5,127,500$

Investment Maturities (in years)December 31, 2015

Carrying Less MoreAmount than 1 1-5 6-10 than 10

Certificates of deposit 300,753$ 300,753$ -0-$ -0-$ -0-$ Mutual funds 148,309,685 148,309,685 -0- -0- -0- Fixed income obligations 5,000,000 -0- -0- -0- 5,000,000

153,610,438$ 148,610,438$ -0-$ -0-$ 5,000,000$

Investment Maturities (in years)December 31, 2014

Credit risk - Statutes authorize Hendricks to invest in interest bearing deposit accounts, passbook savings accounts, certificates of deposit, money market deposit accounts, mutual funds, pooled fund investments, securities backed by the full faith and credit of the United States Treasury and repurchase agreements. The statutes require that repurchase agreements be fully collateralized by U.S. Government or U.S. Government Agency obligations. Concentration of credit risk - Hendricks maintains its investments, which at times may exceed federally insured limits. Hendricks has not experienced any losses in such accounts. Hendricks believes that it is not exposed to any significant credit risk on investments.



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Deposits and investments consist of the following as of December 31, 2015 and 2014:

2015 2014Carrying amount

Deposits 68,685,084$ 55,107,690$ Investments 172,137,830 153,610,438

240,822,914$ 208,718,128$

Included in the balance sheet captionsCash and cash equivalents 6,304,607$ 8,474,250$ Investments 52,990,776 36,133,462 Board designated funded depreciation investments 172,042,613 154,530,628 Held by trustee for debt service 8,979,257 9,099,334 Other board designated investments 505,661 480,454

240,822,914$ 208,718,128$

6. FAIR VALUE MEASUREMENTS The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets

or liabilities in active markets that Hendricks has the ability to access.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.



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Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used as of December 31, 2015 and 2014: Mutual funds: Valued at the daily closing price as reported by the fund. Mutual funds held by

Hendricks are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value and to transact at that price. The mutual funds held by Hendricks are deemed to be actively traded.

Fixed income obligations: Valued at the closing price reported on the active market on which

the individual securities are traded, when available. The fair value of fixed income obligations for which quoted market price is not available are valued based on yields currently available on comparable securities of issuers with similar credit ratings.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014 are as follows:

Total Level 1 Level 2 Level 3Assets

InvestmentsMutual funds - total return bond 877,782$ 877,782$ -0-$ -0-$

Cash and cash equivalents 52,112,994 52,990,776$

Assets whose use is limitedMutual funds

Total return bond 109,007,659$ 109,007,659$ -0-$ -0-$ Small-cap value 5,910,209 5,910,209 -0- -0- Growth 19,374,703 19,374,703 -0- -0- Large blend 31,539,977 31,539,977 -0- -0-

Total mutual funds 165,832,548 165,832,548 -0- -0- Fixed income obligations 5,127,500 -0- 5,127,500 -0-

170,960,048 165,832,548$ 5,127,500$ -0-$

Cash and cash equivalents 10,267,483 Certificates of deposit 300,000

Total assets whose use is limited 181,527,531$

December 31, 2015



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Total Level 1 Level 2 Level 3Assets

InvestmentsMutual funds - total return bond 835,575$ 835,575$ -0-$ -0-$

Cash and cash equivalents 35,297,887

36,133,462$

Assets whose use is limitedMutual funds

Total return bond 96,940,002$ 96,940,002$ -0-$ -0-$ Small-cap value 5,255,921 5,255,921 -0- -0- Growth 17,229,833 17,229,833 -0- -0- Large blend 28,048,354 28,048,354 -0- -0-

Total mutual funds 147,474,110 147,474,110 -0- -0- Fixed income obligations 5,000,000 -0- 5,000,000 -0-

152,474,110 147,474,110$ 5,000,000$ -0-$

Cash and cash equivalents 11,335,553 Certificates of deposit 300,753

Total assets whose use is limited 164,110,416$

December 31, 2014

Hendricks’ policy is to recognize transfers between levels as of the end of the reporting period. There were no transfers during 2015 and 2014. Realized gains and losses included in earnings are reported in the consolidated statements of revenues and expenses as a component of investment income. The market value of investments exceeded cost by approximately $8,674,000 and $10,206,000 as of December 31, 2015 and 2014, respectively. The gains and losses included in earnings for the years are attributable to the change in unrealized gains and losses relating to assets held as of December 31, 2015 and 2014 and are reported in the consolidated statements of revenues and expenses as a component of investment income. Hendricks holds investments which are exposed to various risks such as interest rate, market, and credit. Due to the level of risk associated with these securities and the level of uncertainty related to changes in the value, it is at least reasonably possible that changes in the various risk factors will occur in the near term that could materially affect the amounts reported in the accompanying consolidated financial statements.



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The following methods and assumptions were used by Hendricks in estimating the fair value of its financial instruments: Cash and cash equivalents, accounts payable, other current liabilities, salaries, wages and related liabilities and estimated third-party settlements: The carrying amount reported in the consolidated balance sheets for cash and cash equivalents, accounts payable, other current liabilities, salaries, wages and related liabilities and estimated third-party settlements approximate fair value based on their short-term maturity. Long-term debt: Fair value of Hendricks’ fixed rate revenue bonds is estimated using discounted cash flows based on current fixed rates available to similar entities with similar credit ratings. As of December 31, 2015, the carrying value of the fixed rate long-term debt was $102,935,000 with a fair value of approximately $115,618,000. 7. CAPITAL ASSETS Progressions for capital assets for 2015 and 2014 follow:

December 31, December 31,2014 Additions Disposals Transfers 2015

Land 16,407,702$ 166,500$ -0-$ -0-$ 16,574,202$ Land improvements 6,185,675 11,538 -0- -0- 6,197,213 Buildings and fixed equipment 253,106,765 9,382,331 (2,477,220) 2,174,169 262,186,045 Major movable equipment 76,974,775 15,946,598 (6,355,886) -0- 86,565,487 Construction in progress 2,637,667 197,383 (2,686) (2,174,169) 658,195

Total capital assets 355,312,584 25,704,350 (8,835,792) -0- 372,181,142

Less accumulated depreciationLand improvements 3,862,065 318,471 -0- -0- 4,180,536 Buildings and fixed equipment 90,719,348 9,259,815 (2,424,791) -0- 97,554,372 Major movable equipment 54,635,231 6,180,075 (6,153,886) -0- 54,661,420

Total accumulated depreciation 149,216,644 15,758,361 (8,578,677) -0- 156,396,328

Capital assets, net 206,095,940$ 9,945,989$ (257,115)$ -0-$ 215,784,814$

December 31, December 31,2013 Additions Disposals Transfers 2014

Land 16,307,701$ 100,001$ -0-$ -0-$ 16,407,702$ Land improvements 6,010,567 175,108 -0- -0- 6,185,675 Buildings and fixed equipment 245,289,973 4,248,120 (393,837) 3,962,509 253,106,765 Major movable equipment 79,924,436 9,161,446 (9,088,377) (3,022,730) 76,974,775 Construction in progress 331,097 3,246,997 (648) (939,779) 2,637,667

Total capital assets 347,863,774 16,931,672 (9,482,862) -0- 355,312,584

Less accumulated depreciationLand improvements 3,588,934 273,131 -0- -0- 3,862,065 Buildings and fixed equipment 82,820,294 8,291,021 (391,967) -0- 90,719,348 Major movable equipment 57,684,783 6,019,255 (9,068,807) -0- 54,635,231

Total accumulated depreciation 144,094,011 14,583,407 (9,460,774) -0- 149,216,644

Capital assets, net 203,769,763$ 2,348,265$ (22,088)$ -0-$ 206,095,940$



26

Significant outstanding commitments on capital assets as of December 31, 2015 were approximately $48,000,000. 8. LONG-TERM DEBT Hendricks issued Indiana Bond Bank Special Program Refunding Bonds, Series 2007A dated May 24, 2007 in the amount of $44,915,000. The Series 2007A bonds mature serially on an annual basis starting in April 2013 through April 2030 at interest rates ranging from 5.00% to 5.25%. Interest is due semi-annually on April 1 and October 1. Net revenues and certain assets are held by the trustee to secure the tax-exempt revenue bonds. The net book value of the collateral approximated the carrying value of the Series 2007A bonds as of December 31, 2015 and 2014. Hendricks issued Indiana Bond Bank Special Program Bonds, Series 2009A dated March 12, 2009 in the amount of $75,000,000. The Series 2009A bonds mature serially on a semi-annual basis (February 1 and August 1) through February 2029 at interest rates ranging from 4.0% to 5.5%. Net revenues and certain assets held by the trustee secure the tax-exempt revenue bonds. The net book value of the collateral approximated the carrying value of the Series 2009A bonds as of December 31, 2015 and 2014. The Series 2007A and 2009A Bonds require Hendricks to maintain certain financial debt coverage ratios. As of December 31, 2015 and 2014, Hendricks believed it was in compliance with the debt coverage ratios. In 2009, Hendricks issued Indiana Taxable Economic Development Revenue Bonds, Series 2009 in the amount of $5,000,000. These Bonds bear interest at 5% through February 2030 with the first principal payment due in February 2019 and are unsecured. Hendricks is also the sole bond holder of the Indiana Taxable Economic Development Revenue Bonds, Series 2009. During 2015, Hendricks borrowed from the Indiana Finance Authority (the Authority), the Health Facility Revenue Bonds, Series 2015A Bonds (tax-exempt) for $40,125,000 and Series 2015B Bonds (taxable) for $7,875,000 to construct a new ambulatory care facility. Hendricks, the Authority and Fifth Third Bank (Fifth Third) then entered into a Bond Purchase Agreement (the Agreement) where Fifth Third purchased from the Authority all of the Series 2015A and 2015B Bonds in a private placement. The Agreement runs through the maturity date of the Series 2015A and 2015B Bonds which is October 2022. The 2015A Bonds bear interest at a fixed rate of 1.87% and Series 2015B Bonds bear interest at a fixed rate of 2.83%. The 2015A and 2015B Bonds have a draw down period through December 31, 2017 with scheduled principal payments beginning in January 2018 through October 2022. The Series 2015A and 2015B Bonds are secured by Hendricks’ net revenues. Approximately $1,263,000 had been drawn down on the Series 2015A and 2015B Bonds as of December 31, 2015.



27

Subsequent to December 31, 2015, Hendricks entered into a line of credit agreement with Fifth Third with a maximum amount of $24,000,000 to fund working capital. The line of credit bears interest at the floating 30 day LIBOR rate plus 125 basis points and secured by Hendricks net revenues. The line of credit expires in January 2017. Subsequent to December 31, 2015, Hendricks issued Indiana Taxable Economic Development Revenue Bonds, Series 2016 in the amount of $2,600,000. These Bonds bear interest at 2% through April 2036 and are unsecured. Hendricks is also the sole bond holder of the Indiana Taxable Economic Development Revenue Bonds, Series 2016. Progressions for long-term debt for 2015 and 2014 include the following:

December 31, Additional December 31, Current2014 Borrowings Payments 2015 Portion

Indiana Bond BankSpecial Program Refunding

Bonds Series 2007A 41,690,000$ -0-$ (1,730,000)$ 39,960,000$ 1,820,000$

Special Hospital ProgramBonds Series 2009A 60,965,000 -0- (2,990,000) 57,975,000 3,140,000

Indiana Taxable EconomicDevelopment Revenue

Bonds, Series 2009 5,000,000 -0- -0- 5,000,000 -0-

Indiana Finance AuthorityHealth Facility RevenueBonds, Series 2015A & B(construction draws) -0- 1,263,000 -0- 1,263,000 -0-

Other -0- 820,369 (217,800) 602,569 269,192

107,655,000 2,083,369$ (4,937,800)$ 104,800,569 5,229,192$

Unamortized bond premium 3,587,019 3,351,972

111,242,019$ 108,152,541$

December 31, Additional December 31, Current

2013 Borrowings Payments 2014 PortionIndiana Bond Bank

Special Program RefundingBonds Series 2007A 43,340,000$ -0-$ (1,650,000)$ 41,690,000$ 1,730,000$

Special Hospital ProgramBonds Series 2009A 63,810,000 -0- (2,845,000) 60,965,000 2,950,000

Indiana Taxable EconomicDevelopment Revenue

Bonds, Series 2009 5,000,000 -0- -0- 5,000,000 -0-

112,150,000 -0-$ (4,495,000)$ 107,655,000 4,680,000$

Unamortized bond premium 3,823,565 3,587,019

115,973,565$ 111,242,019$



28

Aggregate maturities of long-term debt are as follows:

Year EndingDecember 31, Principal Interest Total

2016 5,229,192$ 5,214,625$ 10,443,817$ 2017 5,807,659 4,963,825 10,771,484 2018 6,343,718 4,725,556 11,069,274 2019 5,905,000 4,464,238 10,369,238 2020 6,320,000 4,155,550 10,475,550

2021-2025 36,740,000 15,624,363 52,364,363 2026-2030 38,455,000 4,786,356 43,241,356

104,800,569$ 43,934,513$ 148,735,082$

9. NET PATIENT SERVICE REVENUE Hendricks has agreements with third-party payors that provide for reimbursement to Hendricks at amounts different from its established rates. Estimated contractual adjustments under third-party reimbursement programs represent the difference between Hendricks’ billings at standard rates and amounts reimbursed by third-party payors. They also include any differences between estimated third-party reimbursement settlements for prior years and subsequent final settlements. A summary of the reimbursement arrangements with major third-party payors is as follows: Medicare Medicare inpatient services are reimbursed based on a predetermined amount for each case based on the diagnosis associated with the patient (Prospective Payment System). These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. The prospectively determined rates are not subject to retroactive adjustment. Hendricks’ classification of patients under the Prospective Payment System and the appropriateness of patient admissions are subject to validation reviews by the Medicare peer review organization which is under contract with Hendricks to perform such reviews. Medicare outpatient services are primarily reimbursed on predetermined rates based on the services provided. Medicaid and Hendricks Assessment Fee Program Hendricks is reimbursed for Medicaid inpatient services under a prospectively determined rate-per-discharge and is not subject to retroactive adjustment. The differences between standard charges and reimbursement from these programs are recorded as contractual adjustments. Reimbursement for Medicaid outpatient services is based on predetermined rates, and is not subject to retroactive cost based settlements.



29

In 2012, Hospital Assessment Fee (HAF) Program was approved by Centers for Medicare & Medicaid Services (CMS). The purpose of the HAF Program is to fund the State share of enhanced Medicaid payments and Medicaid Disproportionate Share (DSH) payments for Indiana hospitals. Previously, the State share was funded by governmental entities through intergovernmental transfers. The Medicaid enhanced payments relate to both fee for service and managed care claims. The Medicaid enhanced payments are designed to follow the patients and result in increased Medicaid rates. During 2015 and 2014, Hendricks recognized HAF Program expense of approximately $3,107,000 and $12,059,000, respectively, which resulted in Medicaid rate increases. The HAF Program expense is included in operating expenses in the consolidated statements of revenues and expenses. The Medicaid rate increases under the HAF Program are included in patient service revenue in the consolidated statements of revenues and expenses. The HAF Program is approved for extension through June 30, 2017. As a governmental entity, Hendricks is also eligible for the Indiana Medicaid Supplemental programs including Medicaid DSH and Municipal Upper Payment Limit programs. Hendricks recognized reimbursement from these programs within net patient service revenue of approximately $4,882,000 and $2,928,000 during 2015 and 2014, respectively. These programs are administered by the State of Indiana, but rely on Federal funding. Other Payors Hendricks also has entered into payment agreements with certain commercial insurance carriers and preferred provider organizations. The basis for payment to Hendricks under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates. Patient service revenue for 2015 and 2014 consists of the following:

2015 2014

Inpatient routine services 26,091,711$ 23,303,836$ Inpatient ancillary services 110,209,506 94,126,287Outpatient ancillary services 419,295,377 356,611,624Long-term care services 253,058,643 198,906,472

Gross patient service revenue 808,655,237 672,948,219

Contractual allowances 290,882,142 181,338,453Uninsured self pay discounts 4,504,336 4,199,551Charity care 8,034,315 7,774,867Provision for bad debts 16,929,696 22,397,804

Deductions from revenue 320,350,489 215,710,675 Net patient service revenue 488,304,748$ 457,237,544$



30

10. DEFINED BENEFIT PENSION PLAN Plan Description Hendricks has a defined benefit pension plan (the Plan) as authorized by IC 16-22-3-11. The Plan provides retirement, disability and death benefits to Plan members and beneficiaries. The Plan was established by written agreement by the Board of Trustees. Nyhart is the actuary and third party administrator of the Plan. National Bank of Indianapolis is the custodian of the Plan’s assets. In 2013, Hendricks froze benefits to a majority of Plan participants whose benefits were fully vested at that time and began offering retirement benefits to employees through a tax deferred annuity plan (See Note 11). Participants who meet certain age and service requirements continue to accrue benefits under the Plan. For more information on the Plan, participants should contact the Administrative Offices (ATTN: Vice President of Finance/CFO), at PO Box 409, Danville, IN, 46122-0409. Benefits Provided The Plan principally provides retirement benefits. For those participants who continue to accrue benefits, the following summarizes benefits available:

Participants are fully vested after 7 years of service. Employee normal retirement date is the first day of the month coincident with or following age 65. The early retirement date for vested employee members can occur once an employee has attained age 55 with 5 years of service. A participant’s monthly normal retirement benefit is the total of 0.45% final average compensation plus 0.45% of final average compensation in excess of $833. This total is multiplied by years of benefit service. No benefits accrue for years ending before age 25. A participant’s early retirement benefit is reduced by approximately 5% for each year prior to the participant’s normal retirement date. The late retirement benefit is the greater of 1) average monthly earnings and benefit service determined as of the normal retirement date or 2) average monthly earnings and benefit service determined as of the late retirement date.

For participants who have terminated their employment, vested benefits are generally distributable at their time of termination in a lump sum. Funding Policy The contribution requirements of Plan members are established by the written agreement between Hendricks Board of Trustees and the Plan Administrator. Plan members’ contributions are not required by the Plan agreement. Hendricks is required to contribute at an actuarially determined rate. Hendricks does not expect to contribute to the Plan in 2016.



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Employees Covered by Benefit Terms As of December 31, 2015 and 2014, the following employees were covered by the benefit terms of the Plan:

2015 2014Active plan members, including

terminated but vested participants 1,091 1,172 Inactive plan members and

beneficiaries receiving benefits 265 248 Inactive plan members entitled to but

not yet receiving benefits 769 729 2,125 2,149

Contributions The annual required contributions for 2015 and 2014 and estimated liabilities as of January 1, 2015 and 2014 were determined as part of the actuarial valuations using the Entry Age Normal cost method. Net Pension Liability The total pension liability was measured as of December 31, 2015 and 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2015 and 2014. Actuarial assumptions The total pension liability in the December 31, 2015 and 2014 actuarial valuations were determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 2.50%Salary increases 3.5%- 6.0%Investment rate of return 7.50%

Mortality rates were based on the RP-2015 Sex Distinct Mortality Table with generational improvements beginning in 2006 based on the Social Security Administration’s assumptions. The actuarial value of assets was based on market value of assets with a five year phase in of gains and losses, subject to a 20% corridor. The same actuarial assumptions were used to determine the actuarial value required contributions for 2015 and 2014.



32

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-TermTarget Expected Real

Asset Class Allocation Rate of Return

Money market funds 5% 1.00%Fixed income funds 30% 2.50%Equity funds 65% 6.50%

100%

Discount Rate The discount rate used to measure the total pension liability was 7.5% for 2015 and 2014. The projection of cash flows used to determine the discount rate assumed that Hendricks’ contributions will be made at rates equal to the difference between actuarially determined contribution rates and the employee rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Net Pension Liability The following presents the net pension liability of Hendricks, calculated using the discount rate of 7.5%, as well as what Hendricks’ net pension liability would be if it were calculated using a discount rate that is 1% lower (6.5%) or 1% higher (8.5%) than the current rate:

Current 1% Decrease Discount 1% Increase

(6.5%) Rate (7.5%) (8.5%)

Net pension liability (1,039,976)$ (7,845,708)$ (13,890,073)$ Detailed information about the pension plan’s fiduciary net position is available in a separately issued actuarial valuation report.



33

Changes in the Net Pension Liability The changes in the net pension liability during 2015 and 2014 were as follows:

Total Pension Plan Fiduciary Net Pension

Liability Net Position Liability(a) (b) (a) - (b)

Balance, 12/31/2014 51,456,381$ 66,075,659$ (14,619,278)$

Service cost 466,554 -0- 466,554 Interest 3,737,349 -0- 3,737,349 Differences between expected

and actual experience 659,468 -0- 659,468 Changes of assumptions 1,893,100 -0- 1,893,100 Benefit payments (4,183,243) (4,183,243) -0- Net investment income -0- 203,831 (203,831) Administrative expenses -0- (229,428) 229,428 Other -0- 8,498 (8,498)

Net change 2,573,228 (4,200,342) 6,773,570 Balance, 12/31/2015 54,029,609$ 61,875,317$ (7,845,708)$

Total Pension Plan Fiduciary Net PensionLiability Net Position Liability

(a) (b) (a) - (b)

Balance, 12/31/2013 48,689,255$ 62,745,756$ (14,056,501)$

Service cost 452,071 -0- 452,071 Interest 3,636,062 -0- 3,636,062 Benefit payments (1,321,007) (1,321,007) -0- Net investment income -0- 4,722,125 (4,722,125) Administrative expenses -0- (71,215) 71,215

Net change 2,767,126 3,329,903 (562,777) Balance, 12/31/2014 51,456,381$ 66,075,659$ (14,619,278)$



34

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For 2015, Hendricks recognized pension expense of approximately $970,000. For 2014, Hendricks recognized a pension credit of approximately $508,000. As of December 31, 2015 and 2014, Hendricks reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources:

Deferred DeferredOutflows Inflows

of Resources of Resources

Balance, 1/1/15 -0-$ (54,722)$ Differences between expected

and actual experience 659,468 -0- Amortization of expected versus actual (109,911) -0- Changes in assumptions 1,893,100 -0- Amortization of changes in assumptions (315,517) -0- Differences between projected and

actual earnings on plan investments 4,577,870 -0- Amortization of projected versus actual

earnings on plan investments (915,574) 13,680 Balance, 12/31/15 5,789,436$ (41,042)$

Deferred DeferredOutflows Inflows

of Resources of Resources

Balance, 1/1/14 -0-$ (68,402)$ Amortization of projected versus actual

earnings on plan investments -0- 13,680 Balance, 12/31/14 -0-$ (54,722)$



35

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows:

Year EndingDecember 31,

2016 1,327,322$ 2017 1,327,322 2018 1,327,320 2019 1,341,002 2020 425,428

5,748,394$

11. TAX DEFERRED ANNUITY PLAN AND OTHER BENEFIT PLANS Plan Description Hendricks has a tax deferred annuity plan as authorized by IC 16-22-3-11. The plan provides retirement, disability and death benefits to plan members and beneficiaries. The plan was established by a written agreement by the Board of Trustees, generally to replace the defined benefit pension plan (See Note 10). Great West Life & Annuity Insurance Company is the third party administrator for the plan. Wells Fargo Bank, NA is the custodian of the plan’s assets. Hendricks also offers non-qualified 457(b) benefit plans to certain eligible employees. For more information on the plans, participants should contact the Administrative Offices (ATTN: Vice President of Finance/CFO), at PO Box 409, Danville, IN, 46122-0409. Funding Policy The contribution requirements of plan members are established by the written agreement between the Board of Trustees and the Plan Administrator. Plan members may elect to contribute to the plan. Hendricks will contribute to each plan members’ elective deferrals a matching amount up to a maximum percentage of each participant’s annual compensation, to be determined at the discretion of the Board of Trustees. In 2015 and 2014, the discretionary match was 50% of the plan member’s deferral up to 10% of the eligible compensation. The discretionary employer contribution was 2% of eligible compensation for 2015 and 2014. Hendricks’ contributions to the plans for 2015 and 2014 were approximately $3,053,000 and $1,299,000, respectively.



36

12. RENTAL EXPENSE Hendricks has leases expiring at various times through 2018. Leases that do not meet the criteria for capitalization are classified as operating leases with related rentals charged to operating as incurred. Total rent expense, including cancelable and non-cancelable leases, for 2015 and 2014 was approximately $3,192,000 and $3,443,000, respectively. Minimum future payments on non-cancelable leases for the years following December 31, 2015 are:

Year EndingDecember 31,

2016 199,700$ 2017 40,826 2018 6,800

247,326$

Rent expense for facilities and equipment under the long-term care leases discussed in Note 1 was approximately $29,961,000 and $27,406,000 for 2015 and 2014, respectively. Annual rent expense through 2019 will approximate $30,000,000 under these leases. 13. CONCENTRATION OF CREDIT RISK Hendricks corporate office and its hospital facilities are located in Danville, Indiana. Other outpatient, ambulatory care and physician services are located in Avon, Plainfield, Lizton, Bainbridge, Greencastle and Brownsburg, Indiana. Hendricks grants credit without collateral to its patients, most of who are residents of the County and are insured under third-party payor agreements. The mix of receivables and revenue from patients and third-party payors as of December 31, 2015 and 2014 was as follows:

2015 2014 2015 2014

Medicare 24% 26% 43% 42%Medicaid 12% 7% 7% 6%Anthem/Blue Cross 13% 9% 25% 27%Commercial and other 21% 18% 21% 19%Self-Pay 30% 40% 4% 6%

100% 100% 100% 100%

Receivables Revenues



37

Under the long-term care leases, Hendricks recorded expenses related to purchased services from the Managers of the facilities of approximately $133,143,000 and $134,572,000 during 2015 and 2014, respectively. Amounts due to the Managers (including intracompany accounts not eliminated in consolidation), included in current liabilities, as of December 31, 2015 and 2014 approximated $51,242,000 and $31,605,000, respectively. 14. BLENDED COMPONENT UNITS Hendricks includes two blended component units in its reporting entity. Condensed component unit information for all of its blended component units as of and for the year ended December 31, 2015 is as follows:

Foundation HAMCO TotalBalance sheetAssets

Current assets 893,199$ 2,246,182$ 3,139,381$ Capital assets -0- 932,603 932,603

Total assets 893,199$ 3,178,785$ 4,071,984$

LiabilitiesOther current liabilities 8,233$ 656,361$ 664,594$

Total liabilities 8,233 656,361 664,594

Net positionNet investment in capital assets -0- 932,603 932,603 Unrestricted 884,966 1,589,821 2,474,787

Total net position 884,966 2,522,424 3,407,390 Total liabilities and net position 893,199$ 3,178,785$ 4,071,984$

Statement of Revenues and Expensesand Changes in Net Position

RevenuesNet patient service revenue -0-$ 4,136,589$ 4,136,589$

Total revenues -0- 4,136,589 4,136,589

ExpensesDepreciation -0- 321,336 321,336Other expenses 579,221 2,166,143 2,745,364

Total expenses 579,221 2,487,479 3,066,700

Operating income (loss) (579,221) 1,649,110 1,069,889

Nonoperating revenues (expenses) 629,432 21,510 650,942

Excess revenues over expenses 50,211 1,670,620 1,720,831

Dividends -0- (1,670,400) (1,670,400)

Change in net position 50,211 220 50,431

Net position, beginning of year 834,755 2,522,204 3,356,959Net position, end of year 884,966$ 2,522,424$ 3,407,390$

2015



38

Foundation HAMCO TotalStatement of cash flowsCash provided by (used in)

Operating activities 45,595$ 439,358$ 484,953$ Capital and related financing activities -0- (555,340) (555,340) Investing activities -0- 16,390 16,390

Change 45,595 (99,592) (53,997) Cash and cash equivalents, beginning of year 785,065 701,859 1,486,924 Cash and cash equivalents, end of year 830,660$ 602,267$ 1,432,927$

2015

Condensed component unit information for all of its blended as of and for the year ended December 31, 2014 is as follows:

Foundation HAMCO TotalBalance sheetAssets

Current assets 837,865$ 2,326,112$ 3,163,977$ Capital assets -0- 698,599 698,599

Total assets 837,865$ 3,024,711$ 3,862,576$

LiabilitiesOther current liabilities 3,110$ 502,507$ 505,617$

Total liabilities 3,110 502,507 505,617

Net positionNet investment in capital assets -0- 698,599 698,599 Unrestricted 834,755 1,823,605 2,658,360

Total net position 834,755 2,522,204 3,356,959 Total liabilities and net position 837,865$ 3,024,711$ 3,862,576$

Statement of Revenues and Expensesand Changes in Net Position

RevenuesNet patient service revenue -0-$ 3,269,068$ 3,269,068$

Total revenues -0- 3,269,068 3,269,068

ExpensesDepreciation -0- 182,881 182,881Other expenses 434,704 1,940,420 2,375,124

Total expenses 434,704 2,123,301 2,558,005

Operating income (loss) (434,704) 1,145,767 711,063

Nonoperating revenues (expenses) 516,381 31,551 547,932

Excess revenues over expenses 81,677 1,177,318 1,258,995

Dividends -0- (1,170,000) (1,170,000)

Change in net position 81,677 7,318 88,995

Net position, beginning of year 753,078 2,514,886 3,267,964Net position, end of year 834,755$ 2,522,204$ 3,356,959$

2014



39

Foundation HAMCO TotalStatement of cash flowsCash provided by (used in)

Operating activities 69,266$ 117,488$ 186,754$ Capital and related financing activities -0- (470,147) (470,147) Investing activities -0- 14,388 14,388

Change 69,266 (338,271) (269,005) Cash equivalents, beginning of year 715,799 1,040,130 1,755,929 Cash equivalents, end of year 785,065$ 701,859$ 1,486,924$

2014

Separate financial information for the component units can be obtained by contacting the Administrative Offices (ATTN: Vice President of Finance/CFO), at PO Box 409, Danville, IN, 46122-0409. 15. SELF INSURANCE Hendricks is self-insured for employee health claims. A third party administrator processes the claims for Hendricks who maintains an estimated liability for the amount of claims incurred but not reported. Hendricks also maintains reinsurance including a stop loss for individual employees over $300,000 a year with no aggregate limit. Substantially all employees are covered for major medical benefits. The total health claims expense was approximately $15,724,000 and $12,795,000 for 2015 and 2014, respectively. Claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. Changes in balance of health claim liabilities during the past two years are as follows:

2015 2014

Unpaid claims, beginning of year 1,087,127$ 1,332,126$ Incurred claims and changes in estimates 15,723,843 12,795,145Claim payments (13,761,745) (13,040,144) Unpaid claims, end of year 3,049,225$ 1,087,127$

As of December 31, 2015 and 2014, Hendricks had $-0- of reinsurance recovery receivables for stop loss claims netted against the unpaid claims liability.



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16. RESTRICTED NON-EXPENDABLE NET POSITION Restricted nonexpendable net position includes non-controlling interests, which represents the portion that is owned by investors that are external to and not included in the consolidated financial statements, as described below:

2015 2014Non-controlling interests 1,261,212$ 1,161,210$

Hendricks consolidates as a blended component unit, HAMCO, in which external investors have a minority, non-controlling interest. Total net position for Hendricks’ controlling and the non-controlling interest is described below:

Controlling Non-controllingInterest Interest Total

Net position, December 31, 2013 1,357,328$ 1,157,558$ 2,514,886$ Operating income 573,907 571,860 1,145,767 Nonoperating income 15,804 15,747 31,551 Dividends (586,045) (583,955) (1,170,000)

Change in net position 3,666 3,652 7,318 Net position, December 31, 2014 1,360,994 1,161,210 2,522,204

Operating income 824,555 824,555 1,649,110 Nonoperating income 10,755 10,755 21,510 Purchase (sale) of stock (99,892) 99,892 -0- Dividends (835,200) (835,200) (1,670,400)

Change in net position (99,782) 100,002 220 Net position, December 31, 2015 1,261,212$ 1,261,212$ 2,522,424$

SUPPLEMENTARY INFORMATION


CONSOLIDATING BALANCE SHEET DECEMBER 31, 2015

See report of independent auditors on pages 1 through 3. 41

Assets and deferred outflows Hendricks Foundation HAMCO Eliminations ConsolidatedCurrent assets

Cash and cash equivalents 4,871,680$ 830,660$ 602,267$ -0-$ 6,304,607$ Investments 52,112,993 -0- 877,783 -0- 52,990,776 Patient accounts receivable, net 42,860,349 24,550 -0- -0- 42,884,899 Inventories 2,091,937 -0- 383,638 -0- 2,475,575 Other current assets 30,006,793 37,989 382,494 (232,200) 30,195,076 Current portion of assets whose use is limited 5,229,192 -0- -0- -0- 5,229,192

Total current assets 137,172,944 893,199 2,246,182 (232,200) 140,080,125

Assets whose use is limitedBoard designated funded depreciation investments 172,042,613 -0- -0- -0- 172,042,613 Held by trustee for debt service 8,979,257 -0- -0- -0- 8,979,257 Other board designated investments 505,661 -0- -0- -0- 505,661

Total assets whose use is limited 181,527,531 -0- -0- -0- 181,527,531

Less current portion 5,229,192 -0- -0- -0- 5,229,192

Noncurrent assets whose use is limited 176,298,339 -0- -0- -0- 176,298,339

Capital assetsLand 16,574,202 -0- -0- -0- 16,574,202 Depreciable capital assets 352,281,659 -0- 3,730,939 (1,063,853) 354,948,745 Construction in progress 658,195 -0- -0- -0- 658,195

369,514,056 -0- 3,730,939 (1,063,853) 372,181,142 Less accumulated depreciation 154,661,845 -0- 2,798,336 (1,063,853) 156,396,328

Capital assets, net 214,852,211 -0- 932,603 -0- 215,784,814

Other assetsPension asset 7,845,708 -0- -0- -0- 7,845,708 Other 1,537,006 -0- -0- (1,261,212) 275,794

Total other assets 9,382,714 -0- -0- (1,261,212) 8,121,502Total assets 537,706,208 893,199 3,178,785 (1,493,412) 540,284,780

Deferred outflows 7,467,158 -0- -0- -0- 7,467,158

Total assets and deferred outflows 545,173,366$ 893,199$ 3,178,785$ (1,493,412)$ 547,751,938$


CONSOLIDATING BALANCE SHEET DECEMBER 31, 2015


Liabilities and net position Hendricks Foundation HAMCO Eliminations ConsolidatedCurrent liabilities

Current portion of long-term debt 5,229,192$ -0-$ -0-$ -0-$ 5,229,192$ Accounts payable 17,186,397 8,233 656,228 (232,200) 17,618,658 Accrued salaries and related liabilities 9,008,222 -0- (10) -0- 9,008,212 Accrued expenses and other current liabilities 52,028,757 -0- 143 -0- 52,028,900 Accrued interest 1,752,912 -0- -0- -0- 1,752,912 Estimated third-party settlements 949,937 -0- -0- -0- 949,937

Total current liabilities 86,155,417 8,233 656,361 (232,200) 86,587,811

Long-term debt, net of current portion 102,923,349 -0- -0- -0- 102,923,349

Total liabilities 189,078,766 8,233 656,361 (232,200) 189,511,160

Deferred inflows 41,042 -0- -0- -0- 41,042

Total liabilities and deferred inflows 189,119,808 8,233 656,361 (232,200) 189,552,202

Net positionNet investment in capital assets 114,166,828 -0- 932,603 -0- 115,099,431 Restricted

Debt service 8,979,257 -0- -0- -0- 8,979,257 Restricted for pension - expendable 13,594,102 -0- -0- -0- 13,594,102 Non-expendable -0- -0- -0- 1,261,212 1,261,212

Total restricted 22,573,359 -0- -0- 1,261,212 23,834,571 Unrestricted 219,313,371 884,966 1,589,821 (2,522,424) 219,265,734

Total net position 356,053,558 884,966 2,522,424 (1,261,212) 358,199,736

Total liabilities and net position 545,173,366$ 893,199$ 3,178,785$ (1,493,412)$ 547,751,938$


CONSOLIDATING STATEMENT OF REVENUES AND EXPENSES YEAR ENDED DECEMBER 31, 2015


Hendricks Foundation HAMCO Eliminations ConsolidatedOperating revenue

Net patient service revenue 488,304,748$ -0-$ 4,136,589$ (4,136,589)$ 488,304,748 Other revenue 6,571,883 -0- -0- -0- 6,571,883

Total operating revenue 494,876,631 -0- 4,136,589 (4,136,589) 494,876,631

Operating expensesSalaries and wages 93,570,159 -0- 36,091 -0- 93,606,250 Employee benefits 28,540,466 -0- 3,501 -0- 28,543,967 Professional medical fees 1,713,680 -0- -0- -0- 1,713,680 Other professional fees 29,104,826 -0- -0- (4,136,589) 24,968,237

Medical and surgical supplies 26,930,030 -0- 1,300,687 -0- 28,230,717 Drugs and intravenous solutions 11,234,430 -0- 191,451 -0- 11,425,881 Food 6,414,693 -0- -0- -0- 6,414,693 Purchased services 148,673,264 -0- 395,488 -0- 149,068,752

Equipment rental 3,184,565 -0- 7,906 -0- 3,192,471 Hospital Assessment Fee 3,106,589 -0- -0- -0- 3,106,589 Telephone and utilities 8,943,035 -0- -0- -0- 8,943,035 Depreciation and amortization 15,585,870 -0- 321,336 -0- 15,907,206

Insurance 6,428,715 -0- 8,750 -0- 6,437,465 Facility and equipment leases 29,960,580 -0- -0- -0- 29,960,580 Other supplies and expenses 41,976,481 579,221 222,269 (245,404) 42,532,567

Total operating expenses 455,367,383 579,221 2,487,479 (4,381,993) 454,052,090

Operating income (loss) 39,509,248 (579,221) 1,649,110 245,404 40,824,541

Nonoperating income (expense)Investment income (loss) and other 2,022,746 629,432 21,510 (1,080,714) 1,592,974 Interest expense (5,125,952) -0- -0- -0- (5,125,952)

Total non operating income (expense), net (3,103,206) 629,432 21,510 (1,080,714) (3,532,978)

Change in net position before other items 36,406,042 50,211 1,670,620 (835,310) 37,291,563

Other itemsContributions -0- -0- -0- 99,892 99,892 Dividends -0- -0- (1,670,400) 835,200 (835,200)

Change in net position 36,406,042$ 50,211$ 220$ 99,782$ 36,556,255$


CONSOLIDATING BALANCE SHEET (RESTATED) DECEMBER 31, 2014


Assets and deferred outflows Hendricks Foundation HAMCO Eliminations ConsolidatedCurrent assets

Cash and cash equivalents 6,987,326$ 785,065$ 701,859$ -0-$ 8,474,250$ Investments 35,260,799 -0- 872,663 -0- 36,133,462 Patient accounts receivable, net 38,682,494 26,794 -0- -0- 38,709,288 Inventories 2,114,680 -0- 429,725 -0- 2,544,405 Other current assets 17,307,849 26,006 321,865 (232,775) 17,422,945 Current portion of assets whose use is limited 4,680,000 -0- -0- -0- 4,680,000

Total current assets 105,033,148 837,865 2,326,112 (232,775) 107,964,350

Assets whose use is limitedBoard designated funded depreciation investments 154,530,628 -0- -0- -0- 154,530,628 Held by trustee for debt service 9,099,334 -0- -0- -0- 9,099,334 Other board designated investments 480,454 -0- -0- -0- 480,454

Total assets whose use is limited 164,110,416 -0- -0- -0- 164,110,416

Less current portion 4,680,000 -0- -0- -0- 4,680,000

Noncurrent assets whose use is limited 159,430,416 -0- -0- -0- 159,430,416

Capital assetsLand 16,407,702 -0- -0- -0- 16,407,702 Depreciable capital assets 334,155,469 -0- 3,175,599 (1,063,853) 336,267,215 Construction in progress 2,637,667 -0- -0- -0- 2,637,667

353,200,838 -0- 3,175,599 (1,063,853) 355,312,584 Less accumulated depreciation 147,803,497 -0- 2,477,000 (1,063,853) 149,216,644

Capital assets, net 205,397,341 -0- 698,599 -0- 206,095,940

Other assetsPension asset 14,619,278 -0- -0- -0- 14,619,278 Other 2,234,943 -0- -0- (1,360,994) 873,949

Total other assets 16,854,221 -0- -0- (1,360,994) 15,493,227

Total assets 486,715,126 837,865 3,024,711 (1,593,769) 488,983,933

Deferred outflows 1,795,457 -0- -0- -0- 1,795,457

Total assets and deferred outflows 488,510,583$ 837,865$ 3,024,711$ (1,593,769)$ 490,779,390$


CONSOLIDATING BALANCE SHEET (RESTATED) DECEMBER 31, 2014


Liabilities, deferred inflows and net position Hendricks Foundation HAMCO Eliminations ConsolidatedCurrent liabilities

Current portion of long-term debt 4,680,000$ -0-$ -0-$ -0-$ 4,680,000$ Accounts payable 13,164,589 3,110 502,260 (232,775) 13,437,184 Accrued salaries and related liabilities 8,512,333 -0- 209 -0- 8,512,542 Accrued expenses and other current liabilities 31,446,327 -0- 38 -0- 31,446,365 Accrued interest 1,836,829 -0- -0- -0- 1,836,829 Estimated third-party settlements 2,606,248 -0- -0- -0- 2,606,248

Total current liabilities 62,246,326 3,110 502,507 (232,775) 62,519,168

Long-term debt, net of current portion 106,562,019 -0- -0- -0- 106,562,019

Total liabilities 168,808,345 3,110 502,507 (232,775) 169,081,187

Deferred inflows 54,722 54,722

Total liabilities and deferred inflows 168,863,067 3,110 502,507 (232,775) 169,135,909

Net positionNet investment in capital assets 95,950,779 -0- 698,599 -0- 96,649,378 Restricted

For debt service 9,099,334 -0- -0- -0- 9,099,334 Restricted for pension - expendable 14,564,556 -0- -0- -0- 14,564,556 Non-expendable -0- -0- -0- 1,161,210 1,161,210

Total restricted 23,663,890 -0- -0- 1,161,210 24,825,100 Unrestricted 200,032,847 834,755 1,823,605 (2,522,204) 200,169,003

Total net position 319,647,516 834,755 2,522,204 (1,360,994) 321,643,481

Total liabilities, deferred inflows and net position 488,510,583$ 837,865$ 3,024,711$ (1,593,769)$ 490,779,390$


CONSOLIDATING STATEMENT OF REVENUES AND EXPENSES (RESTATED) YEAR ENDED DECEMBER 31, 2014


Hendricks Foundation HAMCO Eliminations ConsolidatedOperating revenue

Net patient service revenue 457,237,544$ -0-$ 3,269,068$ (3,269,068)$ 457,237,544 Other revenue 6,361,995 -0- -0- -0- 6,361,995

Total operating revenue 463,599,539 -0- 3,269,068 (3,269,068) 463,599,539

Operating expensesSalaries and wages 87,128,917 -0- 62,752 -0- 87,191,669 Employee benefits 21,879,411 -0- 14,318 -0- 21,893,729 Professional medical fees 2,342,882 -0- -0- -0- 2,342,882 Other professional fees 21,926,586 -0- -0- (3,269,068) 18,657,518

Medical and surgical supplies 25,301,406 -0- 1,274,053 -0- 26,575,459 Drugs and intravenous solutions 9,023,348 -0- 170,835 -0- 9,194,183 Food 6,557,509 -0- -0- -0- 6,557,509 Purchased services 148,709,694 -0- 206,249 -0- 148,915,943

Equipment rental 3,431,248 -0- 11,514 -0- 3,442,762 Hospital Assessment Fee 12,058,688 -0- -0- -0- 12,058,688 Telephone and utilities 9,450,183 -0- -0- -0- 9,450,183 Depreciation and amortization 14,440,317 -0- 182,881 -0- 14,623,198

Insurance 4,816,665 -0- 8,430 -0- 4,825,095 Facility and equipment leases 27,406,480 -0- -0- -0- 27,406,480 Other supplies and expenses 37,838,723 434,704 192,269 -0- 38,465,696

Total operating expenses 432,312,057 434,704 2,123,301 (3,269,068) 431,600,994

Operating income (loss) 31,287,482 (434,704) 1,145,767 -0- 31,998,545

Nonoperating income (expense)Investment income (loss) and other 7,896,124 516,381 31,551 (589,711) 7,854,345 Interest expense (5,350,629) -0- -0- -0- (5,350,629)

Total non operating income (expense), net 2,545,495 516,381 31,551 (589,711) 2,503,716

Change in net position before other items 33,832,977 81,677 1,177,318 (589,711) 34,502,261

Other itemsContributions -0- -0- -0- -0- -0- Dividends -0- -0- (1,170,000) 586,045 (583,955)

Change in net position 33,832,977$ 81,677$ 7,318$ (3,666)$ 33,918,306$

REQUIRED SUPPLEMENTARY INFORMATION


REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2015


SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

2015 2014Total pension liability

Service cost 466,554$ 452,071$ Interest 3,737,349 3,636,062 Differences between expected

and actual experience 659,468 -0- Changes of assumptions 1,893,100 -0- Benefit payments (4,183,243) (1,321,007)

Net change in pension liability 2,573,228 2,767,126

Total pension liability - beginning 51,456,381 48,689,255 Total pension liability - ending (a) 54,029,609$ 51,456,381$

Plan fiduciary net positionBenefit payments (4,183,243)$ (1,321,007)$ Net investment income 203,831 4,722,125 Administrative expenses (229,428) (71,215) Other 8,498 -0-

Net change in plan fiduciary net position (4,200,342) 3,329,903

Plan fiduciary net position - beginning 66,075,659 62,745,756 Plan fiduciary net position - ending (b) 61,875,317$ 66,075,659$

Net pension liability (a) - (b) (7,845,708)$ (14,619,278)$

Plan fiduciary net position as a % oftotal pension liability 114.52% 128.41%

Covered employee payroll 16,766,172$ 17,051,344$

Net pension liability as a % of coveredemployee payroll -46.79% -85.74%

* The schedule is presented to illustrate the requirement to showinformation for 10 years. However, until a full 10 year trend is compiled, Hendricks will present information for those yearsfor which information is available.


REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2015


SCHEDULE OF CONTRIBUTIONS

Contributions

Actuarially Contribution Covered as % of Covered

Determined Employer Deficiency Employee EmployeeContribution Contribution (Excess) Payroll Payroll

12/31/2015 -0-$ -0-$ -0-$ 16,766,172$ 0.00%12/31/2014 -0-$ -0-$ -0-$ 17,051,344$ 0.00%12/31/2013 -0-$ -0-$ -0-$ 17,062,098$ 0.00%12/31/2012 1,862,492$ -0-$ 1,862,492$ 76,121,054$ 0.00%12/31/2011 1,613,170$ 750,000$ 863,170$ 74,645,517$ 1.00%12/31/2010 1,737,544$ 3,165,000$ (1,427,456)$ 72,800,013$ 4.35%12/31/2009 2,235,559$ 3,000,000$ (764,441)$ 67,826,899$ 4.42%12/31/2008 2,194,715$ 2,284,964$ (90,249)$ 64,044,390$ 3.57%12/31/2007 1,824,368$ 1,681,875$ 142,493$ 57,069,326$ 2.95%12/31/2006 1,957,460$ 2,025,000$ (67,540)$ 53,095,071$ 3.81%

Notes to ScheduleValuation date: Actuarially determined contribution rates are calculated as of January 1.

Methods and assumptions used to determine contribution rates:Actuarial cost method Entry age normalAmortization method 15 year level dollarRemaining amortization period 15 year periodAsset valuation method Market value - 5 year phase in of gains/losses

subject to a 20% corridorSalary increases Ranging from 3.5% to 6.0%Investment rate of return 7.50%Retirement age 65 and 5 years of participationMortality RP-2015 Sex Distinct Mortality with

generational improvements beginning in2006 based on the Social SecurityAdministration's assumptions included inthe 2014 Trustee's Report

Documents

STATE OF INDIANA Hendricks Regional...Accountants, for the period January 1, 2015 to December 31, 2015. In our opinion, the audit report was In our opinion, the audit report was prepared